alpha and beta companies can borrow for a five year term at the following artes moodys credit rating

Part B: Take Home Part (Please work on your own). Short Problems: You should show your formulas and calculations to receive full credit. No steps for formulas and calculations, no credits. Please write neat and legible. If your answer is not readable, it will not be graded for credit. Note: Questions on both sides of the paper. 1) Alpha and Beta Companies can borrow for a five-year term at the following rates: Alpha Beta Moody's credit rating Aa Baa Fixed-rate borrowing cost 10.5% 12.0% Floating-rate borrowing cost LIBOR LIBOR + 1% a. Calculate the quality spread differential (QSD). (5pts) b. Assuming that a swap bank is involved as an intermediary. Assume the swap bank is quoting five-year dollar interest rate swaps at 10.7% - 10.8% against LIBOR flat. After the swap, what is Alpha's floating-rate all-in-cost? What is Beta's fixed-rate all-in-cost? What is the annual cost saving (or profits) in dollar terms for Alpha, Beta and the swap bank if the loan principal is $100 million? Please show the picture for the transactions among all the parties. (10pts)